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EU Acts Against Foreign Airline Subsidies  
User currently offlineManairport From , joined Dec 1969, posts, RR:
Posted (10 years 11 months 2 weeks 4 days 6 hours ago) and read 2496 times:

Flight International (14-20 October 2003) is reporting the following:

'The European Commission is drafting legislation to exercise sanctions against non-European Union airlines subsidised by their governments, singling out the USA for specific mention.'.......'Air Transport is not covered by World Trade Organisation rules, and the EC says the proposed law which may enter force in 2004, fills a vacuum. The commission is vague about sanctions, mentioning only "the imposition of duties" proportionate to the subsidy.' (End of quote.)

About time too! For too long US airlines have been getting away with unfair subsidies. Congratulations to the EU for at last attempting to create a level playing field.

11 replies: All unread, jump to last
 
User currently offlineUal747 From , joined Dec 1969, posts, RR:
Reply 1, posted (10 years 11 months 2 weeks 4 days 6 hours ago) and read 2484 times:

Oh yeah, congrats! Now your's and my ticket prices will go up on both sides of the pond. The only subsidies I can remember US airlines getting are the ones after September 11. European airlines have long been getting subsidies until the EU decided to get "tough" on them as well.

UAL747


User currently offlineDoorsToManual From , joined Dec 1969, posts, RR:
Reply 2, posted (10 years 11 months 2 weeks 4 days 6 hours ago) and read 2484 times:

Well that's all well & good but the EU doesn't have a brilliant record either...Alstom (oh wait, it's French so it's "different"), Air France, Olympic, Swiss....probably others too.

So the usual war of words...


User currently offlineManairport From , joined Dec 1969, posts, RR:
Reply 3, posted (10 years 11 months 2 weeks 4 days 6 hours ago) and read 2474 times:

Ual747 - I agree totally that some EU airlines were, in the past, subsidised by their governments. However, this (quite rightly) has been illegal in the EU for some time. Whilst I appreciate that the events of 9/11 have had a significant impact on US airlines we have to regognise that airlines all over the world have suffered as well, yet receive no subsidy to remain in business. The actions of the US government in this respect once again demonstrate the 'one rule for us and one rule for everyone else' mentality - I thought the USA believed in the free market.

[Edited 2003-10-13 11:40:52]

User currently offlineBobrayner From United Kingdom, joined Apr 2003, 2227 posts, RR: 6
Reply 4, posted (10 years 11 months 2 weeks 4 days 6 hours ago) and read 2457 times:

Alstom? Swiss? Didn't the EU intervene to prevent subsidies in both those cases?

There are clear rules restricting state support of airlines within the EU (which goes hand-in-hand with prising open national markets). I'd rather we had stricter rules sooner, but as it stands the EU isn't being hypocritical.

There are some especially bad offenders out there!

Admittedly, very many airlines have had government support in one way or another...



Cunning linguist
User currently offlineCfalk From , joined Dec 1969, posts, RR:
Reply 5, posted (10 years 11 months 2 weeks 4 days 6 hours ago) and read 2454 times:

Talk about the pot calling the kettle black!!!

How about all the companies in Europe that are owned at least partially by the governments of EU countries? There are dozens of them, and don't even try to tell me that the individual governments don't do anything to help them keep market share, keep competition to a minimum, etc. I know Switzerland's not in the EU, but look at what the Swiss government did in order to protect Swissair/Swiss from new entries - baring Easyjet to Barcelona, suddenly deciding that Lugano was too dangerous, etc.

When did the U.S. ever have an equity stake in a commercial airline? I don't remember that ever happening. Since deregulation, the U.S. government has stood back and let the airlines compete freely, some winning, some loosing, and seeing the average ticket price drop by some 30% in real terms. The Post September 11th subsidies were reasonable as the airlines suffered tremendously through no fault of their own, but rather as a result of national security concerns. United and American Airlines are both on their knees at the moment, and the government certainly won't bail them out (there would be a taxpayers' revolt if they tried!)

I sincerely hope that the U.S. responds forcefully. Barring any EU airline with government equity participation from landing in the U.S. might be a proper move.


[Edited 2003-10-13 11:52:26]

User currently offlineUal747 From , joined Dec 1969, posts, RR:
Reply 6, posted (10 years 11 months 2 weeks 4 days 6 hours ago) and read 2437 times:

"Whilst I appreciate that the events of 9/11 have had a significant impact on US airlines we have to regognise that airlines all over the world have suffered as well, yet receive no subsidy to remain in business. The actions of the US government in this respect once again demonstrate the 'one rule for us and one rule for everyone else' mentality - I thought the USA believed in the free market."


Again, may I stress the points of myself and Cfalk, the bailout was necessary. We potentially could have lost 3 or 4 major airlines in the US. It would be far worse for our economy if the government had allowed the airlines to fail than spending the bucks to save them. Also, you can't tell me that non-US airlines suffered nearly as much as US based airlines. Several reports showed that Americans were flocking to foreign airlines for international travel when possible thinking they would be adverting another attack on US airlines and US interests.

Also, the US airlines recieved ONE bailout, but as Cfalk said, there are many European airlines and companies that their respective countries have a stake in. You can't tell me that those governments do not MAKE SURE their investments have the resources to perform admirably.

UAL747


User currently offlineBobrayner From United Kingdom, joined Apr 2003, 2227 posts, RR: 6
Reply 7, posted (10 years 11 months 2 weeks 4 days 6 hours ago) and read 2421 times:

I sincerely hope that the U.S. responds forcefully. Barring any EU airline with government equity participation from landing in the U.S. might be a proper move.

And if everybody overreacted to minor issues like that, world trade would be crippled. How many times has the USA put punitive tarriffs on imports, &c?

The Post September 11th subsidies were reasonable as the airlines suffered tremendously through no fault of their own, but rather as a result of national security concerns.

Unless the government was actually responsible for 9/11 (which seems unlikely), this looks rather more like state-backed insurance. Is it OK to hand money to airlines during a recession? When a supplier goes bust? During a war? After all, all those are through no fault of their own too.



Cunning linguist
User currently offlineBobrayner From United Kingdom, joined Apr 2003, 2227 posts, RR: 6
Reply 8, posted (10 years 11 months 2 weeks 4 days 5 hours ago) and read 2399 times:

the bailout was necessary. We potentially could have lost 3 or 4 major airlines in the US. It would be far worse for our economy if the government had allowed the airlines to fail than spending the bucks to save them.

Apply this reasoning to other situations in every other country..?

For instance:

"State support for Indian carriers is necessary. India potentially could lose its major airlines. It would be far worse for India's economy if the government allowed the airlines to fail than spending the bucks to save them."

Does that sound acceptable?

I do not accept that airlines should get state support if they can't deal with outside events. That applies regardless of the events, or the country.

A government bailout simply shows that the government is giving free insurance to businesses.



Cunning linguist
User currently offlineCfalk From , joined Dec 1969, posts, RR:
Reply 9, posted (10 years 11 months 2 weeks 4 days 5 hours ago) and read 2384 times:

And if everybody overreacted to minor issues like that, world trade would be crippled. How many times has the USA put punitive tarriffs on imports, &c?

While I disagree with many of the U.S.'s tariff policies, I think that if the EU, which owns equity in airlines, tries to impose sanctions on U.S. airlines because of a one-time subsidy, I think the U.S. would be justified in returning the favor, in proportion to the aid that each side's airlines have benefited from government subsidies/participations in the past. Nobody can deny that European Airlines have received, and still receive, much more assistance than Americans do. If the EU wants to make a point of this, the U.S. should fight fire with fire, and insist that Air France and other airlines are each 100% privately owned before they are allowed to land in the U.S.

Unless the government was actually responsible for 9/11 (which seems unlikely), this looks rather more like state-backed insurance.

Remember that all U.S. airlines were completely grounded for several days, and that travelers took many months to fly in numbers more or less in line with normal levels. This was not the case of European airlines, that kept flying except for their U.S. routes.

If the airlines had such insurance (which they don't - insurance is event-specific, like a particular crash), no insurance company would have been capable of paying billions of dollars, anyway. It's just like when a major natural disaster occurs, and the government steps in to help cover the damage when the insurance industry simply does not have the liquidity - this happens everywhere in the world.

Is it OK to hand money to airlines during a recession?

No. Look at United and American Airlines. Their present woes are due to a recession, and the U.S. government won't touch them.

When a supplier goes bust?

No, that's part of business. That is also why smart companies will try to ensure the survival of several suppliers of the same product (like engines), by offering choices or buying from several manufacturers.

For example, I used to work in the cigarette industry. There are only two major manufacturers left of cigarette making machines - Mollins of the UK, and Hauni of Germany (there used to be a lot more). Hauni machines are by far the best, most productive, fastest, and make the best quality product. But my company, (and all the other major cigarette manufacturers) makes sure that we buy at least a few Mollins machines every year, just to make sure they stay in business and to keep Hauni competitive. That's business.

During a war?

Unless the airlines are forced on the ground, like after 9/11, no. That's part of the business cycle too, unfortunately, and airlines should be flexible enough to adapt to fluctuations in demand. A complete grounding is like a total and artificial absence of demand, and it is simply unreasonable to expect an airline to survive with all their costs and no revenue whatsoever.

Charles


User currently offlineSk From Germany, joined Apr 2003, 75 posts, RR: 3
Reply 10, posted (10 years 11 months 2 weeks 4 days 4 hours ago) and read 2331 times:

May I remember you, that non-EU is not (always) the same than the US - There are a few more countries in the world. And if I'm not mislead by the 1st posting - the topic still is "EU Acts Against Foreign Airline Subsidies".

This may include US-american airlines - yes, but this also has impact on airlines like Emirates. The most US-airlines are already codeshared or evene strongly connected to importent european airlines, so this would not be the problem. EK is offering dumping prices to Asia - not really interested in their yield. And there are more of them.


User currently offlineDoorsToManual From , joined Dec 1969, posts, RR:
Reply 11, posted (10 years 11 months 2 weeks 4 days 4 hours ago) and read 2309 times:

I edited this post because it didn't really contribute anything meaningful to this thread. For those that did/n't read this post before it was edited: I didn't say anything offensive, rather I sort of started bringing in non-aviation-related gripes (about what's wrong with the EU), and belatedly decided it didn't really fit this thread. For those that DID read this post in its unedited form, I stand by everything I wrote 100%, even if irrelevant.  Big grin

For the record: I am an enthusiastic supporter of the EU in most areas of government, and I agree with their concerns regarding foreign airlines & subsidies they receive. However, what I don't like about the EU, and what probably motivated me to start a spiel on matters such as the Common Agricultural Policy etc. is:

1) The current wave of anti-Americanism sweeping across some regions of this continent. I have no problems with people who disagree strongly with the American-led invasion of Iraq, but don't appreciate some people going beyond this and defining themselves or their country in terms of their opposition to all things American. I think this is totally wrong-headed, hypocritical, gratuitous in some cases, and will ultimately disadvantage the EU in the future.

2) Attempts by some govts to hijack certain elements of the EU project in order to bolster their own power & influence over equally important but smaller EU member states. I was so angry when that arrogant Chirac told the small EU future members to "shut up"...I think it was perhaps he who should have done that...

We're all humans, we're all the same, and no one or country is more important than the other.

OK, sorry about being a hypocrite and turning this into a political discussion...there lies the root of my scepticism towards this latest announcement...

[Edited 2003-10-13 14:48:57]

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